CITI: If Trump wins, it would be a disaster for the global economy

A President Donald Trump would not be good for the world economy,
according to Citi.

Willem Buiter, the chief economist at Citi, said in a note to
clients on Thursday that a Trump win would weigh heavily on
financial markets, and that his policies would deter global trade
and economic growth.

"Assuming, somewhat conservatively, that a Trump victory would
lead to a 1 [standard
deviation] increase in global policy uncertainty and a 1
[standard deviation] tightening in US financial conditions (and
that the two shocks affect global growth additively), a Trump
victory could lower global GDP growth by around 0.7-0.8pp,"
Buiter wrote.

Buiter's thinking is on two fronts. The first is that financial
markets are not pricing in a Trump victory, so the immediate
aftermath would lead to uncertainty. The markets being caught on
the wrong foot would be similar to the shake-up that came after
Brexit.

"A Trump victory in particular could prolong and perhaps
exacerbate policy uncertainty and deliver a shock (though perhaps
short-lived) to financial markets," the note said. "Tightening
financial conditions and further rises in uncertainty could
trigger a significant slowdown in US, but also global growth."

Secondly, Buiter notes, the policies that Trump would implement
would curtail trade and economic growth. This would damage global
economic conditions.

"The presidential candidates of both major parties have also
embraced some protectionist 'America First' rhetoric and
policies, including criticism of existing trade agreements (e.g.,
NAFTA and WTO) and have indicated opposing ratifying the
Transpacific Partnership Agreement," Buiter wrote.

"Countries heavily exposed to the US via exports include the US's
neighbors in Canada and Mexico, but exports to the US account for
more than 5% of GDP in a wide range of EMs and some advanced
economies."

Buiter notes that even if Trump loses, the undercurrent of
dissatisfaction in the US that drove him to the nomination will
still be present. The anti-trade, non-stimulative rhetoric will
be around, and thus there are still dangers that another
candidate could seize on this platform.

Buiter projects with a 65% certainty that Clinton will win the
election.